Title
Earning Preview: Synopsys this quarter’s revenue is expected to increase by 63.08%, and institutional views are bullish
Abstract
Synopsys, Inc. will report fiscal results on February 25, 2026 Post Market, with consensus pointing to revenue of $2.39 billion and adjusted EPS of $3.60, while investors weigh the pace of license-led growth, margin mix, and execution against elevated year-over-year comparisons.
Market Forecast
Based on the company’s latest quarterly outlook framework, this quarter’s revenue is estimated at $2.39 billion, implying 63.08% year-over-year growth, while adjusted EPS is projected at $3.60, up 26.77% year over year; EBIT is forecast at $975.79 million, a 95.40% year-over-year increase. The company-focused forecasts available do not include gross profit margin or net profit margin guidance for this quarter; as such, margin expectations are not presented here.
The operating mix continues to be anchored by licensing activity and related contract momentum, with licensing remaining the central revenue driver and services supporting adoption and retention across key accounts. Within the revenue base, licensing appears positioned as the most promising near-term growth catalyst, supported by last quarter’s $1.56 billion contribution; segment-level year-over-year growth data were not disclosed in the available period.
Last Quarter Review
In the prior quarter, Synopsys, Inc. delivered revenue of $2.25 billion, a gross profit margin of 82.02%, GAAP net income attributable to shareholders of $0.45 billion, a net profit margin of 19.90%, and adjusted EPS of $2.90, with year-over-year EPS down 14.71%.
A key highlight was the breadth of the topline acceleration, with revenue up 37.83% year over year and EBIT up 36.37% year over year, while GAAP net profit rose strongly quarter on quarter by 85.02%, reflecting both scale and favorable period-to-period dynamics. By business line, licensing generated $1.56 billion (69.01% of revenue) and maintenance and services contributed $698.78 million (30.99% of revenue), underscoring the dominance of license-driven activity in the quarterly mix; segment-level year-over-year growth rates were not provided in the available disclosures.
Current Quarter Outlook
Core design software and licensing trajectory
The licensing engine remains the backbone of Synopsys, Inc.’s quarterly performance, and it is again the central determinant of whether revenue and EPS align with, exceed, or trail the company-centered forecasts. With licensing representing 69.01% of the last quarter’s revenue base, the pace of renewals and new enterprise-scale engagements will be critical to achieving the projected $2.39 billion revenue and $3.60 adjusted EPS. The estimate implies a robust 63.08% year-over-year revenue expansion, which elevates the importance of large customer ramps and timing of contract recognitions within the quarter. Management’s operational cadence typically emphasizes delivery milestones and deployment readiness; thus, any acceleration in acceptance and delivery schedules can translate into upward revenue variance, while delays can compress quarterly conversion and push recognition into subsequent periods. Given the magnitude of the forecasted EBIT growth at 95.40% year over year, mix toward high-value software deliverables and disciplined operating expenses will also be necessary to support the implied operating leverage trajectory.
Pricing and value capture within advanced design solutions will be another influential swing factor. In prior periods, the company demonstrated an ability to monetize technology advances through renewal cycles and expanded tool adoption within existing accounts, which often manifests as uplift at renewal and increased seat counts. If this pattern holds through the quarter, the licensing line can provide incremental upside beyond the baseline forecast. Conversely, any elongation in customer approval cycles or budget reallocations may shift deal timing to later quarters, creating near-term lumpiness even if full-year revenue remains intact. FX translation and revenue recognition mechanics may also marginally influence reported figures, particularly if licensing revenue is concentrated in geographies with currency volatility against the US dollar.
The expected EPS of $3.60 presumes stable delivery execution alongside the revenue step-up. Operating expenditure discipline and gross margin resilience will matter given the absence of explicit quarterly margin guidance in the available dataset. Should the product mix skew toward high-margin software and away from services, incremental profitability could exceed modeled run-rates; however, a heavier contribution from services or higher cloud delivery costs could lessen the conversion from revenue to operating income within the quarter.
Cloud- and AI-enabled solutions and services momentum
Cloud- and AI-enabled design and verification workflows are a key area of customer interest and adoption, though reported revenue attribution often appears within licensing and services lines rather than as discrete standalone disclosures. The services component, which accounted for $698.78 million in the last quarter, typically supports deployment, enablement, and productivity expansion tied to newer toolchains and methodologies. As customers expand usage to higher-complexity projects, sustained service engagement can improve time-to-value and, over time, reinforce licensing durability. In the near term, services act as an implementation and acceleration layer that can influence adoption rates, project throughput, and, ultimately, the breadth of licensing footprints within large customers.
From a financial lens, the services mix can exert a modest drag on gross margin if it rises meaningfully as a share of quarterly revenue, given services are generally lower margin than perpetual or term license revenue. That said, services frequently play a catalytic role in securing large multi-product commitments and in expanding tool utilization, which can lift licensing in subsequent quarters. For this period, the base case assumes that services remain in a supporting role to licensing, with stable revenue conversion and a margin profile consistent with recent history. Any surge in complex deployments could skew mix toward services in the short term but would likely carry positive implications for multi-quarter licensing momentum, making the trade-off supportive of longer-term growth.
AI-driven productivity enhancements in design workflows may also influence deal sizes and renewal dynamics. As customers quantify efficiency gains and cycle-time reductions, the business case for broader rollouts tends to strengthen. If those outcomes are recognized within the quarter, the licensing line can benefit directly, while services capture supplemental enablement demand. This dynamic underpins the constructive revenue outlook, even though the model does not break out AI-specific revenue.
Key stock-price swing factors this quarter
The most immediate driver of share performance is the degree of alignment between reported results and the company-centered forecasts: revenue of $2.39 billion (+63.08% year over year), adjusted EPS of $3.60 (+26.77% year over year), and EBIT of $975.79 million (+95.40% year over year). A revenue beat primarily driven by higher licensing conversion would likely be taken positively given the margin profile of software revenue, while any shortfall tied to timing of large deliveries or contract acceptances could impact sentiment, even if the underlying demand trend remains healthy. The last quarter’s gross margin of 82.02% provides a high base, but mix shifts toward services or elevated delivery costs could introduce variability in operating leverage, influencing whether EBIT expansion tracks the nearly twofold year-over-year forecast.
Working capital and billing cadences are also relevant. Higher upfront billings or renewals recognized within the quarter can improve cash conversion and reinforce confidence in forward visibility. Alternatively, if acceptance-based milestones move into the next quarter, deferred revenue growth may increase while in-quarter revenue lags, which investors will parse for timing versus demand signals. FX and any isolated one-time items can introduce noise in reported margins and EPS, but the core narrative will hinge on the volume and quality of license-driven growth. Finally, the stock’s reaction function will be shaped by forward commentary on pipeline health and the durability of the elevated growth algorithm implied by current forecasts; constructive commentary on backlog and customer adoption patterns would likely support multiple stability, whereas caution on deal timing could compress near-term sentiment despite solid underlying demand.
Analyst Opinions
The balance of recently available institutional commentary within the specified period skews bullish. Across the captured updates from January 1, 2026 to February 18, 2026, bullish views outnumber bearish views, with the material update pointing to a positive stance; observed ratio in the compiled set is 100% bullish versus 0% bearish.
Bank of America Securities reiterated a Buy rating and set a $560.00 price target during the covered window. The stance reflects confidence in license-led revenue expansion and operating leverage potential consistent with the current-quarter framework that points to $2.39 billion revenue (+63.08% year over year), $975.79 million EBIT (+95.40% year over year), and $3.60 adjusted EPS (+26.77% year over year). In the context of this setup, the bullish case emphasizes three pillars for this print: the probability of robust license conversion from enterprise-scale engagements; resilience in gross margin via a mix that favors high-value software; and disciplined operating expenditures that help translate topline gains into EBIT outperformance. Upside risk, in this view, stems from faster-than-modeled acceptance of high-end design tool deployments, which would bolster both reported revenue and segment economics.
This constructive positioning also acknowledges the path for EPS upside if revenue mix remains favorable. The most immediate catalyst is evidence of above-baseline license activity, which directly informs the trajectory of operating margin given the relatively lower cost of incremental software revenue. If services revenue expands in tandem, the near-term margin effect could be modestly dilutive, but supportive of future-period license expansion—an outcome that bullish analysts tend to treat as healthy investment in customer adoption. On balance, the majority view argues that the company’s setup for the quarter remains favorable relative to expectations embedded in the $3.60 EPS and $2.39 billion revenue figures, with the potential for positive variance contingent on the timing of milestone recognitions and the breadth of license conversions across large accounts.
Within this framework, investors will scrutinize qualitative commentary on booking trends, renewal uplift, and the breadth of multi-product wins to gauge the sustainability of the high growth profile implied by the forecasts. A firm indication that license momentum is broad-based and that delivery schedules proceeded on plan would likely validate the bullish stance. Conversely, if management highlights notable timing shifts or heavier-than-expected services mix, the debate may pivot to the magnitude and duration of any margin impact. The majority opinion entering the event leans toward a constructive read-through on both revenue quality and operating leverage, aligning with the anticipated Post Market update on February 25, 2026.Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
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